Snap’s Big Miss

Snap revenue was $207.9 million, up 62% vs. a year earlier but decelerating once again and badly missing the consensus of $236 million. Snap had an adjusted loss of 14 cents, matching views as polled by Zacks Investment Research. Daily active users rose to 178 million, up 17% vs. a year earlier but below estimates for 181.8 million.

Snap CEO Evan Spiegel even admitted that Snapchat is sometimes “difficult to understand or hard to use.”

Shares fell 17% to 12.53 in late trading.

Snap offers three key lessons for investors. Wait for a proper buy point. Don’t try to guess the bottom. And be wary of investing in an upstart rival trying to mess with the established FANG internet giants, in this case Facebook (FB).

IBD’S TAKE:Take-Two has a best-possible 99 Composite Rating, which combines several IBD ratings into one overall score. All-time stock winners often have Composite Ratings of 95 or above near the start of their big runs. To learn more about Take-Two, and how it stacks up vs. rivals, check out Stock Checkup.

Proper Buy Point

It can be tempting to buy a hot IPO when it debuts, but you should wait for the new stock to prove itself. You should always wait for a proper buy point, such as breaking past a sound entry from a bullish base pattern. But that’s especially true for IPOs, which have no frame of reference.

Snap, which priced its IPO at 17 a share, rose on its first day of trading, and again on its second. But since then shares trended lower.

Don’t Try To Guess The Bottom

Snap hit a record low of 11.28 on Aug. 14, soon after its disappointing Q2 results. Shares rallied somewhat, and for the past couple of months have been moving sideways around their 50-day line.

But unless you’re Warren Buffett, you don’t want to try to guess the bottom. You might end up just catching a falling knife. Snap showed some positive action in late March and early May, only to head for new lows.

Snap seems headed for a big loss Wednesday, though it currently doesn’t seem to be threatening its record low.

Don’t Mess With The FANGs

It is very, very hard for companies to compete with Facebook, Amazon.com (AMZN), Netflix (NFLX) and Google-parent Alphabet (GOOGL). They are huge and have vast resources to fight off upstarts. Most of them generally benefit from network effects. The more people who use their network, the more valuable it becomes.

Snap has a strong audience of teens and young adults in North America and Europe. But outside of those regions and age groups, Snap now seems surrounded. Facebook has rapidly copied many of Snap’s most popular features, especially via Instagram Stories, which has far more users than Snap. So if you haven’t already become a regular Snapchat user, there are strong network effects encouraging you to go with the much-larger Facebook ecosystem.

As for Facebook, the social networking giant recently reported blowout third-quarter earnings and accelerating revenue growth, despite its massive size. More than 2 billion people use Facebook. Its shares are currently in buy range from a proper base.

Take-Two Interactive Software

Take-Two Interactive, best known for its “Grand Theft Auto” video game series, reported stronger-than-expected fiscal second-quarter revenue growth. The video game publisher also guided revenue higher for the holiday Q3, as well as for the full year.

Rival video game makers Electronic Arts (EA) and Activision Blizzard (ATVI) both gave weak revenue guidance for the holiday quarter. Shares of both companies retreated since their results.

Take-Two shares shot up 8% to 114.90 in late trading, suggesting that they’ll set a record high Wednesday.

The stock has run strongly since gapping out of a base three months ago following its Q1 results. The stock hasn’t provided a new entry point, just pulling back modestly in recent days from a record high.